It is already not surprise that resource rich countries often do worse than their poorer neighbors instead of benefiting their huge natural wealth. This phenomenon is so called natural resource curse, which is encountered with resource rich countries, leading them to the slow economic development and political, social failure. But, this is not entirely applicable in every case. When we look at the countries like Norway, Chile and Botswana, those are also rich in the natural resource and showing the quiet impressive achievement with the help of it. So question here is that whether natural resource is curse or blessing. For some yes, for some no. The main point is the matter of the country and how it is dealing with its wealth. And answer would be given by connection between economic and political theory.
There are many types of the curse in economic as well as political sense, which have been studied intensively by leading economist, political and social scientists. From those various disadvantages resulting from natural wealth, here I would mention main four, which may relate more with my case studies. Those are Dutch disease, Volatility in commodity prices, Political corruption and Erosion of democracy. First two are purely concerned with economics and last two are more related with political conditions, moreover where are my main interest in.
It becomes already clear for us that the natural resource wealth is leading to the bad economic performance in some countries. But what should we blame for that unsatisfied result: the huge natural resource or the country (people), who are incapable of spending it in the right way. Here, by people I mean the state, the government of the country and its institutional quality. When the state is transparency and accountability and checks and balance system work in the government, there is no such phenomenon, named "Resource curse". However, once it is occurred in the country, there are also numbers of ways to cure it such as economic policy change, political and social change, distribution of the natural resource curse to the citizen, privatization of the natural resource sector, international level help.
There are two main motivations for me to write this paper: academic as well as personnel. I am from the country, which has one of the fastest growing economies in the world, ranking at 5th in 2012  . All of this has been driven by mining (coal, copper, uranium, gold, rare earths, and the like). Much of its natural resource wealth has come from a long-standing Russian-Mongolian joint venture, Erdenet, but has recently been joined by two giant newcomers, the Oyu Tolgoi (OT) and Tavan Tolgoi (TT) mines in the Gobi desert. Sadly, before the discovery, we didn't have very mature strong democracy and qualified institutions to avoid the curse as Norway did. It has already started to experience problem of corruption and other ills derived from the resource curse. In the end of the paper, I would write about the possible cure for resource curse in case of Mongolia, since it had already overcome its avoiding stage.
Natural resource curse v/s economic development 自然资源诅咒与经济发展
The view, that natural resource exports were at serious disadvantage, was the minority in economics until the late 1980s. Later literature started to suggest that natural resource abundance might be curse than blessing. From Figure1, we can see that there is negative relation between the GDP growth and natural resource export level. For example, the countries like Hong Kong, South Korea are less exporting their natural resources and at the same time showing the higher economic growth when the countries like Bolivia, Venezuela are other way around.
Source: World Development Indicator database (World Bank), Primary exports consist of agricultural raw materials exports, fuel exports, ores and metals, and food exports. 
This phenomenon, where we see negative correlation between resource abundance and economic growth, is so called "Natural resource curse". It has been studied by many economists during the time. Richard Auty was the first, who described that resource-rich countries not only fail to benefit from a favorable endowment, they may actually perform worse than less-endowed countries. This counter-intuitive outcome is the basis of the resource curse thesis.  Also, Jeffrey Sachs and Andrew Warner, showed that countries with huge mineral wealth grow slower than those recourse-poor countries. So, it is certain that there is negative correlation between the natural resource abundance and economic growth, but it is inconclusive when we see countries like Norway, which has huge natural resource and tremendous economic achievement at the same time. From the various numbers of studies, we can see that natural resource curse is not applying to the every case. The some countries, which have efficient economic policy and transparent, democratic political institutions, have performed excellent in long term economic development with the help of their wealth. Norway, Australia, Chile, Argentina, United Arab Emirates are examples of that how resource could be avoidable. From here, question is coming to what to do and what are the possible solutions, if the curse is unavoidable, if it happens to the state, which doesn't have effective institutions.
The list of costs to the resource rich countries speaks for itself: slower than expected growth, barriers to economic diversification, poor social welfare indicators, high level of poverty, inequality and unemployment, higher than average corruption, poor governance, outright authoritarian rule or its omnipresent threat, weak rule of law, a culture of rent seeking, often devastating environmental damage, human rights violation, and greater risk of conflict and war. 
The some of those costs are economical, but some are related to the political concerns and those are more destructive in nature. The four different types of players come into play: international (mining/oil etc) corporations, the companies in the national level, the government and real people. Once, George Soros  had explained the natural resource curse as principal-agent problem. In this case, principal is the people of the country, since they have the ownership of the natural resource and agent is the government. The problem arises, when agent doesn't do his job properly. Domestic and international corporations encounter only with the rulers of the country, (but they not the principals), in order to obtain concessions to exploit natural recourses. The rulers started to be financed by the companies, not from the taxes of the people, who are principals. That is why natural resource cursed countries are less democratic and its economic as well as political institutions perform worse. Answer to the "what to do" question is the form of government quality. They would solve the principal and agent problem and it would eventually help the country stand up on its foot and start to make real use of their wealth.
Types of curses 诅咒的类型
As it was mentioned before, the natural capital abundance may cause the serious disadvantages in economy and political condition of the country, which does not have good wealth management system. The number of scholars such as Sachs and Warner, Auty, Wheeler had suggested that abundance of natural wealth reduces the economic growth. Other scholars have presented evidence to suggest that the economic problems of resource abundant countries have gone beyond poor levels of economic growth  i.e high level or corruption, technological backwards, high unemployment and military challenges to the government. The curse is beyond the economy, it influences also the political as well as social system of the state.
Natural resource cursed economy 自然资源诅咒经济
In simple understanding, the natural resource curse means that the country exports raw natural resource to the foreign market without manufacturing and in the return has a huge amount of the income from it. In short, this phenomenon is the problem of income in the economic sense. Due to quantity of the income coming to the domestic market through resource exports, country suffers Dutch disease and there is high level of volatility in the commodity price because of the wrong timing of the income. It also results to the unequal knowledge in expertise between the corporation and the government before the contract starts, failure of the other sectors caused by Dutch disease and inefficient investment in education and greater amount of government spending.
Dutch disease 荷兰病
Australian gold booms in nineteenth century, Netherlands after discovery of natural gas in the 1960s and Colombian coffee in the 1970s are all the same dynamics caused by Dutch disease. Dutch disease can be explained by the decline of the preexisting domestic sectors (mainly manufacturing in the developed countries and agriculture in developing world) because of the sudden increase in exports of natural resource. Sudden increase in income from natural wealth and plus huge amount of foreign direct investment produces real appreciation in the currency. It creates "spending effect" (non-natural resource commodities more difficult and competing with imports across a wide range of commodities almost impossible) and "resource pull effect" (domestic resources such as labor and materials are shifted to the natural resource sector)  . Dutch disease it real disease because first of all, it creates a large real appreciation in the currency, afterwards economy could not recover itself from the costs of volatility in commodity prices. Second of all, it leads to the de-industrialization by the crowding out of non-commodity exports.  (less diversified economy).
Volatility in commodity prices 商品价格波动
The second main adverse effect of income from natural resource is due to its wrong timing. Volatility of natural resource prices is relatively higher to compare any other primary goods. The main reason for that is "Low short run elasticity".
In simple word, for the sudden rise of prices of the resource, demand does not decrease nor supply increase in the short time of period i.e it is contradicting with famous demand-supply law in the free market. Demand doesn't rise because the capital is spent only for raw material to output and supply elasticity is low because it takes to time to adjust output.8
The difficulties in this phenomenon are uncertainty, which leads to the 'boom-bust cycle'. The man does not simply know when prices would rise or fall, if government spends a lot during the good time, it would certainly have some side effects such as debt crises etc. in the following bad years.
Resource cursed institutions 资源诅咒的机构
When the natural resource curse is explained by the principal agent problem, it is already concern of political science. Here, I will explain why it is so. The problem starts when agent is not playing in the interest of principal. Ideally, principal should be the people of the country, since they have real ownership right of the resource and they pay taxes to their own government in order to the government or authorities to work for them and to fulfill their interest. But in case of resource rich countries, those international or domestic corporations directly encounter with the government and are ready to pay the price to them (not to people) in order to possess the natural wealth. Here, government is financed by those corporations and revenue from the resource, not by taxes and it is not anymore "principal" of the people. That explains why huge natural resource endowed countries more likely have autocratic and oligarchic institutions or corrupted government officials. Moreover, it has great threat to the democracy in the country.
Political corruption 政治腐败
One of the most obvious political risk resulted from resource dependency is the higher level of the corruption. As, I already mentioned before, the natural resource curse occurs only if the country has bad quality of economical, political institutions and non-democratic political culture.
From above figures, we could conclude that the countries with better democratic institutions does not necessarily suffer the corruption problem but in those countries, which have weak institutions, natural resource dependency leads to the higher rate of corruption.
Threat to the democracy and institutions 对民主和制度的威胁
It is obvious that corrupted wealth state itself is threat to its own political system.
Wantchekon (1999), for instance, examined data related to 141 countries between 1950 and 1990 and found that a one percent increase in natural resource dependence, as measured by the ratio of primary exports to GDP, increased the probability of authoritarian government by nearly 8 percent. He also found that countries were more likely to experience failed or slow transitions to democracy. Jensen and Wantchekon (2004) presented similar findings in relation to Africa, concluding that resource abundant countries in this region were more likely to be authoritarian and experience breakdowns in democracy after the democratic transition. Ross (2001) investigated whether there was any variation in regime outcomes across different types of resource economy and different regions. After examining data from 113 states between 1971-1997, he concluded that a states reliance on oil or mineral exports tends to make it less democratic; that this is effect is not caused by other types of primary exports, that is not limited to the Arabian countries, to the middle east, or to Sub-Saharan Africa. 
The reason, why it is happening may have several different reasons. Since the government is financed by revenue from resource exporting, it doesn't work in the interest of the common people. But it is not solely, the some persons in the government fault. It could also caused by the lack of the interest of the commons, who is not showing any effort to change this situation; after all we are the ones who are choosing them.
There are also other studies, huge natural resource endowment such as oil and minerals my cause the civil war and military challenge to the government. Since it is barely concern of my case studies, I left blank on this issue. Mongolia is highly homogenous nation, which doesn't have ethnic complexity and since it has centralized democratic government, there is no problem such as taxation at the regional level etc, which leads to the horizontal level of inequality.
Overcoming the resource curse 克服资源诅咒
Since natural resource curse doesn't burden the countries with strong institutions, for me following looks like the smartest way: being patient, leave the resources under the ground and start strengthening its economical as well as political institutions. Unfortunately, not everyone does that. Andrew Rosser (2006) had classified the recommendations to help abundant countries into 5 main groups such as economic policy change, political policy change, distribution of the natural resource to the citizen, privatization and international level help. Here, I want to mention that the best practice of Norway, how it overcome the curse: transparent and accountable bureaucracy prevents from legal or illegal confiscations of rent and helped to achieve publicly controlled and evenly distributed revenue at the same time as strong social contract prevented time consuming and disruptive rent seeking. 
Humphreys, D.Sachs and E.Stiglitz (2007) had made few recommendation to the national governments and international actions, since they play main role in overcoming the natural resource curse, as it was mentioned before.
Sachs (2007) had suggested that properly managed natural resource can play important role in overall economic development of low-income countries by providing the public financing for crucial investment. This could be investment in infrastructure for undeveloped states, in higher education, science and advanced technologies for middle-income countries and in social welfare spending such as pension, health care etc. for high income countries. 
IMF summarized five prudent ways for a low income country to manage increased foreign aid flows, in our case revenue from natural resource exports can be counted as same.13
Mongolia is the one of the fastest growing economy in the world because of its huge endowment of natural resources in recent times. Certainly, the issue of natural resource is facing with its long term economic development. Much of its natural resource wealth has is projected to be in operation for 60 years. The mining sector's share of Mongolia's export earnings increased from about 55 percent in the early 2000s to 87 percent in 2011 and is projected to reach over 95 percent by 2013 when the Oyu Tolgoi (OT) copper mine becomes operational.  Tavan Tolgoi (TT) is estimated to hold reserves of over 6 billion tonnes of coal.
As we already saw in section 2, there is negative correlation between growth rate and natural come from a long-standing Russian-Mongolian joint venture, Erdenet, but has recently been joined by two giant newcomers, the Oyu Tolgoi (OT) and Tavan Tolgoi (TT) mines in the Gobi desert. Oyu Tolgoi is the largest known undeveloped copper-gold mine in the world. It resource export and it was explained due to the quality of the institutions of the given country. Following both graphs shows that during the last 20 years, Mongolian export (here, mineral resource export take huge amount in it) and GDP growth rate both are in increasing trend, which is positive output. Howsoever, statistic shows Mongolia is weak for institutional resource curse and there are some other specific challenges especially in case of Mongolia.
As is has already mentioned before that good economical and political institution can help to overcome negative correlation between natural resource abundance and economic growth. Therefore, it is important to look at institutional quality of Mongolia. The country become democratic after 1990 and enjoys multi-party democracy, free press and strong activities of the nongovernmental organizations during the last two decades. Howsoever, as we can see from following graphs, governance index does not show great performance in that sense as Norway or Australia does, but it is exactly in the border between good and bad, shows bit better than Azerbaijan, Russia and Turkmenistan. The main components in this graphs are voice and accountability, political stability, government effectiveness, regulatory quality, rule of law and control of corruption. If we see through red line carefully, it is recognized that it started to go down since 2002, which is unpleasant. The statistic says it is because of the deterioration of the corruption sub-index. From here it can be concluded that Mongolia is weak for institutional resource curse and main policies should take place on improvements of the institution, moreover for reduction of the corruption.
Current Policies 当前的政策
The global economic crisis of 2008 shows that macroeconomic policy was not strong enough to prevent from external shock of declining copper price, which is main export of the country.  Followings are main policy challenges of the management of mineral revenues, namely infrastructure, income distribution, fiscal and diversification policies.
As it (Sachs, 2007, p191) was written that properly managed natural resource can play important role in overall economic development of low-income countries by providing the public financing forcrucial investment. This could be investment in infrastructure for undeveloped states, in higher education, science and advanced technologies for middle-income countries and in social welfare spending such as pension, health care etc. for high income countries. Since country has landlocked geographical disadvantage, which hinders trade, investment in infrastructure, such as railways, roads or power plants could be helpful for economic growth in long term.
Cash transfer i.e distribution of the natural resource to the citizen 现金转移即自然资源向公民的分配
Many scholars suggested that one way to avoid resource curse in direct distribution of mineral revenue to its citizens without conserving the money in the government hand. This practice was successfully implemented in Alaska and achieved fair distribution of natural wealth. At the same time it has some side effect such as unemployment and underdevelopment of other sectors. In other word, by giving money to people directly, it encourages not to work and in result of creating rent-seeking behavior. In 2009, it set up a Human Development Fund modeled on an Alaskan program that distributes some royalties to citizens. There are some counter arguments in this method in the country. Some politicians claim that instead of focusing on cash dividend for citizens, money should be spent for infrastructure improvement and new job creation, especially when there are huge income difference between people or inequality and unemployment.
Fiscal policy: Fiscal Stability Fund 财政政策：财政稳定基金
Mongolia's government has proposed a law based on a Chilean measure that will save surplus revenue from mineral royalties when prices are high to stabilize the budget when they fall.
The fiscal framework is supported by a stabilization fund for mineral revenue. When actual mineral revenue exceeds structural mineral revenue, the difference has to be placed in the stabilization fund. Contrary to recommended practice, this applies even if there is an overall fiscal deficit, in which case the government has to borrow to make the transfers into the stabilization fund. On the other hand, when structural mineral revenue exceeds actual mineral revenue and there is an overall fiscal deficit, the fund can be used to finance that deficit. With the start-up of OT operations, the expenditure rule would become binding, and large balances would accumulate in the fund.